Charles Schwab, Jack Bogle join the debate on high-frequency trading

“High-frequency trading is a growing cancer that needs to be addressed,” said Charles Schwab, chairman of Charles Schwab Corp., and Walt Bettinger, Charles Schwab President and CEO, in a statement on Thursday.

The heads of the massive brokerage firm are just the latest to delve into the debate on whether high-frequency traders are hurting the markets. The book “Flash Boys” by author Michael Lewis accuses HFTs, as they are known, of “rigging the markets.”

Comments by Lewis on “60 Minutes” earlier in the week about the use of complex computerized algorithms to trade has struck a cord with major Wall Street powerhouses, including Schwab and Vanguard.

The Schwab statement goes on to say that “high-frequency trading has run amok and is corrupting our capital market system by creating an unleveled playing field for individual investors and driving the wrong incentives for our commodity and equities exchanges.”

The “vibrant, stable and fair” system of the U.S. capital markets is being threatened, the statement says, and high-frequency traders are gaming the system, reaping billions in the process and undermining investor confidence in the fairness of the markets.

Schwab and Bettinger go on to call high-frequency trading “manipulative” by taking advantage of the technological advances and enabling users to “gain millisecond time advantages” and cut ahead in line in front of traditional orders and with access to market data not available to other market participants.

“It has become systematic and institutionalized, with the exchanges supporting it through practices such as preferential data feeds and developing multiple order types designed to benefit high-frequency traders.”

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